German business confidence ends year on high note
Frankfurt (AFP) - The German economy, Europe's biggest, ended the year in "festive mood", new data showed Wednesday, but not enough to light the fireworks for the eurozone as a whole just yet, analysts said.
As Germany, which has consistently outperformed its eurozone neighbours throughout the length of the crisis, gets ready for a third four-year term under Chancellor Angela Merkel, sentiment among both businesses and investors is rising fast.
On Tuesday, the ZEW investor confidence barometer hit a seven-and-a-half year high.
And on Wednesday, the Ifo economic institute's closely watched business climate index rose to its highest level since April 2012.
"The German economy is in a festive mood," said Ifo president Hans-Werner Sinn.
Indeed, Ifo's sub-index measuring firms' outlook for the next six months rose to its highest level in nearly three years.
"Germany's economy is ending the year on a very strong note," said Berenberg Bank economist Christian Schulz.
By sector, the construction and manufacturing industries posted strong gains, while sentiment in the retail and wholesale sectors eased somewhat, Ifo said.
Schulz saw the data as an indication that the European Central Bank's "extremely expansive monetary policy is starting to reach the real economy."
"Nothing can ruin German business optimism," said ING DiBa economist Carsten Brzeski.
"With today's Ifo, the German economy starts an early but well-deserved Christmas break. The next important macro data will only be released next year. The Ifo and other confidence indicators have created a crackling anticipation of the economy's growth prospects going into 2014. Let's hope that there won't be a rude awakening after the holidays," Brzeski said.
Natixis economist Johannes Gareis said the data "paint a rosy picture on the German economic outlook. After growth of 0.5 percent in this year, the German locomotive should significantly gather steam in 2014."
Commerzbank chief economist Joerg Kraemer said while recent hard data -- notably manufacturing orders and industrial output -- had disappointed, that was due to special one-off factors.
"In the fourth quarter, the German economy should post solid growth of 0.3 percent on the third quarter. We predict 1.7 percent for 2014," Kraemer said.
BayernLB economist Stefan Kipar said he is pencilling in growth of 0.4 percent for the fourth quarter, after 0.3 percent in the preceding three months.
"The upward trend, which started in April 2013, has remained intact until December," Kipar said.
"Even if the sub-indices are rather mixed, the Ifo data confirm an acceleration in the economic recovery in Germany in the coming year. Thanks to the ongoing stabilisation in the euro area economy, companies are becoming increasingly confident that the upturn is stable," he said.
IHS Global Insight economist Timo Klein said the German economy "continues to receive support from persistently low short- and long-term interest rates and a relatively subdued value of the euro.
And German exporters are still enjoying a very good competitive position and should thus be well positioned to profit from the current strengthening of global growth momentum," Klein said.
But DekaBank economist Andreas Scheurle was more cautious.
The rise in the Ifo index "is not a year-end spurt, but a gentle Christmas stroll," he said.
Capital Economics economist Jonathan Loynes agreed.
"December's Ifo survey is consistent with other survey evidence pointing to steady but unspectacular growth in the German economy," he said.
Loynes noted that the latest rise in the Ifo index was once again driven by the expectations index.
"Accordingly, the rise in the survey still seems to be built largely on hope, rather than reality.
"Overall, then, the Ifo survey provides another indication that the German economy is doing better than its neighbours, especially France. But there are few signs that the economy is building up the momentum needed to ensure a strong recovery in the eurozone as a whole," Loynes concluded.
